Indiana farmland value loses ground
WEST LAFAYETTE, Ind. For the first time in 11 years, Indiana farmland has lost value. The 1999 Purdue University Land Values Survey revealed that on average, Indiana farmland value dropped by more than 2 percent since 1998.
"Given low commodity prices and the growing expectation that prices will not quickly rebound, the downward adjustment in farmland values is understandable," says Purdue agricultural economist Craig Dobbins, who conducted the survey in June.
Top-quality land, defined as yielding 155 bushels of corn per acre, dropped in value by 2.7 percent, from $2,715 to $2,643 on average, statewide. Average land yielding 126 bushels stood at $2,092, down 2.9 percent from $2,155 last year. Poor land with its 97-bushel corn yield took the biggest hit, falling in value by 5.3 percent, from $1,632 to $1,546 per acre, survey respondents said.
Good cropland in the southeastern and northern sections of the state managed to beat the odds and rise in value. Top and average land in the north increased in value by 2.2 percent and 1.7 percent respectively. The value of top land in the southeastern part of state rose by 2.9 percent, while average land there rose in value by 0.1 percent. Farmland considered poor lost value in both of the regions.
The change in value revealed in the survey will not have an immediate effect in the farming community, according to Dobbins.
"It's generally believed that much of the farmland is in financially strong hands," Dobbins says. "As land values begin to decline, many potential sellers may decide to wait to sell until profit prospects improve."
Dobbins, who received responses from 374 Indiana farm managers, appraisers, brokers, bankers and Purdue University Cooperative Extension Service educators in the survey, says farmland cash-rental rates also fell for the first time in 11 years, but they did not decline as much as land values.
Statewide, the survey shows annual rent for an acre of top land averages $138. That's down 1.4 percent from last June's average of $140 per acre. The drop in rents for average land was 1.8 percent, going from $112 to $110. Poor land rents at about $84 per acre, a 2.3 percent drop from last June's $86 rent.
Dobbins says survey respondents have become increasingly pessimistic about land values during recent years.
"In 1997, 54 percent of respondents expected some or all classes of land to increase in value six months into the future," he says. "In 1998, this percentage dropped to 28, and now it stands at 19 percent."
Asked to project land values for December 1999, survey respondents say they expected declines ranging from 1.7 to 3.4 percent for all land types throughout the state, except for southeastern Indiana, where they projected increases of 2 percent to 4.8 percent.
"Compared to last year when there was no strong consensus regarding the future direction of land values, this year points towards continued short-term declines, except in the southeast," Dobbins says. "In the past, these projections have accurately predicted direction, but have not been a good indicator of the actual magnitude of change."
Looking further into the future, most of those surveyed were optimistic.
"About 51 percent predicted that land values would increase over the next five years. Twenty-five percent expected a decline, and 24 percent predicted no change," Dobbins says.
Source: Craig Dobbins, (765) 494-9041, firstname.lastname@example.org
Writer: Amy H. Raley, (765) 494-6682, email@example.com
Purdue News Service: (765) 494-2096; firstname.lastname@example.org